(Feb 20): Japan’s key inflation gauge eased to the slowest pace in two years on the back of temporary factors, in an outcome unlikely to shake the central bank’s resolve to press ahead with rate hikes when the timing is right. The yen weakened after the data.
Consumer prices excluding fresh food rose 2% from a year earlier in January, the smallest gain since January 2024, according to the Ministry of Internal Affairs and Communications on Friday. That matched the median economist forecast and came after the gauge climbed 2.4% in the previous month.
The measure that also strips out energy to reflect underlying strength increased 2.6%, well above the Bank of Japan’s (BOJ) 2% target. Overall inflation that includes everything dropped to 1.5%, slipping below 2% for the first time since March 2022.
Friday’s data show that price growth in Japan has entered a slightly cooler phase compared with last year thanks in part to Prime Minister Sanae Takaichi’s fiscal measures aimed at easing costs of living. A historic surge pushed the pace of inflation excluding fresh food to 3.1% in 2025, the fourth straight year above 2%.
Government steps to reduce fuel costs through subsidies and tax measures helped push overall energy prices 5.2% lower in January. Also, the price advance for food excluding fresh goods slowed due in part to comparisons with a year earlier, when those costs spiked.
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The yen weakened to around 155.20 to the dollar after the data were released, from around 154.98 just before.
The BOJ has flagged expectations that price growth would slow partly due to more government steps including utility subsidies as well as comparisons with price spikes a year earlier. Authorities have said they remain focused on underlying inflation rather than such one-off factors.
For that reason, the data aren’t likely to keep the central bank from raising its benchmark interest rate when conditions allow. Many economists think the next hike could come as soon as April, with an outside risk of a move when authorities next set policy on March 19.
Uploaded by Felyx Teoh
